5 Unloved Small Cap Stocks With Strong Dividends

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I’m a financial editor with a proven track record of identifying stocks that significantly outperform the market. My investment advice can be found in Forbes Investor and Forbes Special Situation Survey – the two longest running investment newsletters currently published by Forbes Media LLC – for which I serve as editor.

Sometimes you can have your cake and eat it too. Here are a fistful of equities with rich dividends, but also poised to produce ample capital gains.my younger days, I shunned dividend-paying stocks. To me, they were what your father bought, what those who already had loads of money owned. In other words, these weren’t the investments you bought to get rich, they were what you wanted after you became rich.

Let me illustrate with an insultingly simple example. Say you have two stocks you purchased for $10 each as shown in the table below. Stock A climbs to $12 in a year for a gain of $2. Stock B ends the same period at $10 for no gain but paid out $2 in dividends over this span. Either way, your total return is the same at 20%.

But two other factors are usually required for such stocks to truly stand out. First, there must be sufficient evidence to indicate the dividend payments are safe and will even grow over time. Second, there needs to be evidence for why shares of these firms will be able to realize great value sooner rather than later.

But to believe this decline is justified is to ignore the substantial operational progress the company was able to make in 2023, which I expect to contribute to better results this year. This is most apparent in the improvement in the company’s financial position last year.

Yet I believe a major factor that has contributed to the more sluggish pace of decision-making by its clients is the advent of generative artificial intelligence , their desire to incorporate this technology into their research platforms and solutions going forward, and the uncertainty presented on how best to proceed.

Yet I think this slide ignores the fact that ACCO delivered on its most important financial metric: free cash flow. Indeed, boosted by solid free cash flow production of $54.3 million in the final quarter, the company generated $117.5 million in free cash in 2023. This was up 52% from the $77.5 million produced in 2022 and easily met its initial forecast of at least $100 million in 2023.

 

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